HRBUS82_D_Jones_4650_836_8_Report

Strategy-Environment
Fit: a Classification and
Analysis of General
Mining and Heavy
Construction Firms’
Strategic Profiles
2015
DEVIN MICHAEL JONES
4650-836-8
UNIQUE NUMBER: 872468 HRBUS82

TABLE OF CONTENTS
Chapter 1
Table of Figures.......................................................................................................................................3
1 Introduction ....................................................................................................................................4
2 Background .....................................................................................................................................4
3 Context............................................................................................................................................6
3.1 The General Mining Industry ..................................................................................................6
3.2 The Heavy Construction Industry............................................................................................9
4 Problem Statement.........................................................................................................................9
5 Research Purpose..........................................................................................................................10
5.1 Primary Research Objective..................................................................................................10
5.2 Secondary Research Objectives............................................................................................10
Chapter 2
1 Introduction ..................................................................................................................................11
2 Strategy as a Central Component in Organisational Configurations ............................................11
2.1 The Classification Utilised in this Research...........................................................................12
2.1.1 Strategy Content...........................................................................................................12
3 Strategic Fit ...................................................................................................................................15
3.1 Internal Fit.............................................................................................................................16
3.2 Environment Fit.....................................................................................................................17
Chapter 3
1 Introduction ..................................................................................................................................18
2 Research Approach.......................................................................................................................18
2.1 Rationale for a qualitative approach ....................................................................................18
3 Research Design............................................................................................................................19
4 Sampling........................................................................................................................................20
4.1 Sampling strategy..................................................................................................................20
4.1.1 Selecting the participants .............................................................................................21
5 Data collection and analysis..........................................................................................................24
5.1 Data sources..........................................................................................................................24
5.1.1 Documentation in organisational research ..................................................................24
5.2 Data analysis .........................................................................................................................24
6 Ethical considerations...................................................................................................................27
7 Limitations.....................................................................................................................................27

Chapter 4
1 Introduction ..................................................................................................................................28
2 The Common Strategic Stances and Actions of JSE Listed Heavy Construction and General
Mining Organisations in 2012...............................................................................................................28
2.1 The General Mining Industry ................................................................................................28
2.2 The Heavy Construction Industry..........................................................................................35
3 The Strategic Fit of the Strategic Stances and Actions of the General Mining and Heavy
Construction Organisations ..................................................................................................................39
3.1 The General Mining Industry ................................................................................................39
3.2 The Heavy Construction Industry..........................................................................................41
Chapter 5
1 Introduction ..................................................................................................................................45
2 Conclusions ...................................................................................................................................45
2.1 The general mining industry .................................................................................................45
2.2 The heavy construction industry ..........................................................................................45
3 Recommendations for future research.........................................................................................46
References……………………………………………………………………………………………………………………………………….47
TABLE OF FIGURES
FIGURE 1: THE MINING VALUE CHAIN....................................................................................................................8
FIGURE 2: MILES AND SNOW'S ADAPTIVE CYCLE .................................................................................................12
FIGURE 3: VENKATRAMAN'S CLASSIFICATORY FRAMEWORK...............................................................................16
FIGURE 4: ARM STRATEGY....................................................................................................................................35
FIGURE 5: THE BASIL READ GROUP STRUCTURE...................................................................................................37
FIGURE 6: THE AVENG GROUP STRUCTURE..........................................................................................................37
FIGURE 7: MURRAY & ROBERTS GROUP STRUCTURE...........................................................................................38
FIGURE 8: GROUP FIVE STRUCTURE .....................................................................................................................38

Chapter 1: Introduction to Research
1 INTRODUCTION
One of the most prevalent concepts in the strategy formulation literature is that the appropriateness
of an organisation’s strategy can be articulated in terms of its link, or conceptual fit, with the
environment or organisational contingencies facing the firm (Zajac, et al., 2000; Louw & Venter,
2013). Successfully attaining this strategic congruence shapes the strategies formulated, and has
been traditionally viewed as having desirable performance implications (Burton, et al., 2004).
Within this general perspective, this study is concerned specifically with the environment-strategy
relationship. It departs from the perspective of Venkatraman and Prescott (1990; 1) who assert that
“coalignment is the degree to which strategic resource deployments adhere to an ‘ideal profile’ for a
given environment”. The thrust of this research is to extend this notion one step further by
identifying one or more ideal profiles for a specific industry. The majority of extant research on
environment-strategy coalignmnet attempts to examine the performance implications of aligning
strategy with the environment, or test the concept’s pertinence in specific geographic locations.
Indeed research has been done on specific industries, however in most cases the industry was only
selected as it met certain predetermined criteria, such as high levels of competition or volatility.
2 BACKGROUND
In the context of strategic management, strategy can be viewed as “the direction and scope of an
organisation over the long-term, which achieves advantage for the organisation through its
configuration of resources within a changing environment and to fulfil stakeholder obligations”
(Louw & Venter, 2013:10). This definition captures the essence of strategic management- a concern
for the organisation’s long-term survival, the organisation’s relation to the environmnet in which it
operates, the strategic deployment of its resources in response to external opportunities and threats
and its responsibility to meet the needs of its stakeholders. It is appreciable that the success of an
organisation is dependent on its strategy. In the field of strategic management, an organisation’s
strategy is divided into three levels (Louw & Venter, 2013:19-20):
 Business level strategy which relates to how an organisation intends to compete and build a
competitive advantage in each area of business.
 Corporate level strategy refers to the overall purpose and scope of an organisation.
 Functional level strategy which concerns the support and operationalization of an
organisation’s overall strategy and competitive approach.
The field of strategic management has been around since the early 1950’s (Bracker , 1980). It offers
managers a plethora of knowledge in all avenues of organisational strategy, from conception to
execution, providing all the expertise necessary to craft theoretically sound strategies. And indeed
managers have. Yet it is unexceptional for one organisation to outperform another operating in the
same industry, despite the fact they have both employed a similar strategy, or possess a relatively
equal bundle of resources. The concept of strategic fit offers a justification for such an occurrence.
Strategic fit is defined as “the situation in which all the internal and external elements relevant for a
company are in line with each other and with the corporate strategy” (Scholz, 1987:78). This

definition captures the central contentention of the concept- all three elements must be aligned in
order for an organisation to prosper. In order to understand the nature of strategic fit, the remaining
two elements (as strategy is discussed above) are briefly outlined below:
The Internal Organisation
The organisation is internally comprised of two facets, namely its resources and capabilities:
 Resources: with theoretical roots in the resource-based view (RBV) (Ehlers & Lazenby,
2010), an organisation’s internal resources are comprised of tangible resources, such as
financial resources or state of the art machinery, and intangible resources which include an
organisation’s reputation or brand identity, for example.
 Capabilities: these are the distinctive skills that an organisation possesses, inherent in its
technologies, processes and strategic architecture (Louw & Venter, 2013). Capabilities
represent an organisation’s ability to effectively employ and extract value from its
resources. Owing to the current business environment of rapid and unpredictable change,
emphasis has been placed on an organisation’s dynamic capabilities. Defined as activities
and processes employed by managers to integrate, build and reconfigure its competencies
to address rapidly changing environments (Louw & Venter, 2013:25). Present across the
entire organisation, they drive the creation, evolution and recombination of other resources
into new sources of competitive advantage.
The Exteral Environmnet
The organisation and the external environment in which it operates act as an open system, meaning
that it will both affect and be affected by the environment (Ehlers & Lazenby, 2010). The
environment can be divided into three levels, namely the external environment, the
macroenvironment and the industry environment (Ehlers & Lazenby, 2010; Louw & Venter, 2013):
 The external environment includes everything outside of the organisation at the global,
country and industry levels that might affect the ability of the organisation to achieve its
goals. The factors in this environment are beyond the control of the organisation, such as
major global political events.
 The macroenvironmnet is comprised of political, legal, economic, social-cultural,
technological, demographic and ecological forces at a global and/ or country level. These
factors, which are beyond the control of the organisation, are usually not confined to a
single organisation’s operating situation.
 The industry environment includes actual and potential competitors, suppliers and buyers,
organisations that supply substitute or complementary products. The industry environment
is primarily influenced by the government.
It is evident that attaining a strategic congruence between an organisation’s internal and external
environments and its strategy is a complex task. To further elucidate the delicate balance strategic
fit entails, consider the following example of an organisation that is operating in an uncertain,
dynamic industry environmnet. It is generally held that such an environment favours strategies of
innovation and differentiation (Miller, 1988; Payne, 2001). If the organisation in question has indeed
employed innovative and differentiative strategies, a clear alignment or fit would exist between its
strategy and the environment. However if that organisation is characterised internally by rigidity,
extensive division of labour and centralised control, its internal structures would not fit such
strategies. Instead, such strategies would favour organic, decentralised and intensively integrated
internal structures (Miles, et al., 1978; Miller, 1988; Lukas, et al., 2001). The internal structures of

the organisation would be unable to effectively facilitate the implementation of its strategies and
subsequently affect its performance.
3 CONTEXT
The strategy-environment coalignment concept, or strategic fit, is itself inherently based on context
(Scholz, 1987). Hence the following section contains a brief description of the two industry settings
of this research that will form the basis of understanding the nature of strategic fit in each industry.
An industry can be described as a group of organisations producing products that are essentially the
same (Louw & Venter, 2013; 193). The organisation’s interaction with the forces present in its
industry environnment have a profound affect on its long-term success. The industry and its
dynamics determine the appropriateness of an organisation’s strategies, making it crucial for an
organisation to understand its industry comprehensively in order to successfully align its strategies
with its environment (Ehlers & Lazenby, 2010). Next, the two industries that are examined in this
research are briefly outlined.
3.1 THE GENERAL MINING INDUSTRY
For centuries, mining has been the very backbone of the civilised world. This is evident in the early
development of resource rich countries such as the USA, Canada and Australia. A country such as
South Africa aptly illustrates this as the mining industry made an important contribution to the
economy in the past century. In 2012 alone, this industry contributed R260 billion or 8.8% to the
country’s gross domestic product (Chamber of Mines South Africa, 2012).
From a product perspective, the mining sector is highly diverse. There are at least 80 mineral
commodities and seven principle classes of minerals (World Business Council for Sustainable
Development, 2002):
• Base metals
• Ferrous metals
• Precious metals
• Minor metals
• Energy minerals
• Construction minerals
• Diamonds and precious gem
The mining industry has developed extensively along its value chain, as illustrated in figure 1.
Mining operations are unlike operations in other industries; operations are confined to areas in
which nature has created the ore reserves on which the industry depends. To the countries blessed
with mineral resources, in many instances, are regarded as national assets. This has resulted in the
state ownership of mining assets or a strong state involvement in the regulation of the industry
(Kirkby, 2002). This was exemplified in South Africa by a proposal advocated by, among others, the
ruling party’s youth league for the nationalisation of the country’s mining industry. Despite high-
level assurances that government would not nationalise the mining industry, it had profound
negative effects on investor confidence (Mkhwanazi, 2012). This strong state involvement adds to
the complexity of the industry.

In the past two decades, the global mining industry has seen some of the greatest changes in its
history. Commodity and other price fluctuations, regulatory influences, global opportunities, global
competition, mergers, takeovers, strategic alliances and restructuring are some of the critical issues
that mining firms have to face on an ever increasing scale.

Figure 1: The mining value chain
Source: http://www.mbendi.co.za/indy/ming/p.htm (2002)
Divest
Definition: curtailment of operations Input: revenue and profit Output: change in economic parameters
Participants: board decision, including
purchaser of the asset based on due diligence
or feasibility
Market
Definition: to maximise profit from the sale of
the identified product(s)
Input: saleable product(s) Output: revenue and profit Participants: marketing team
Beneficiate
Definition: the optimal extraction of the
saleable product(s) and safe disposal of
residues
Input: quantified ore-body stockpile Output: saleable product
Participants: plant team or operating
contractor
Transport
Definition: the removal of the mined ore-
body stockpile and transport to destination
Input: quantified ore-body stockpile
Output: stockpiled ore-body containing
tonage at average grade
Participants: mining team or contractors
Mine
Definition: to safely remove the mineral
resource containing saleable product(s)
Input: exposed ore-body containing mineral
resource
Output: quantified ore-body stockpile Participants: mining team or contractors
Establish
Definition: the planning and execution of the
mine plan
Input: bankable feasibility
Output: ore-body exposed and ready to
exploit
Participants: design team, construction
contractors, mining contractors
Valuate
Definition: the determination of the
profitability of a project, based on the
identified mineral resource
Input: mineral resource model Output: bankable feasibility
Participants: goelogical and business
development team and/ or contractors
Locate
Definition: to determine the presence of a
viable mineral deposit containing saleable
products
Input: suspected mineral deposit Output: mineral resource estimate Participants: geological exploration team
Activity

3.2 THE HEAVY CONSTRUCTION INDUSTRY
The heavy construction industry is comprised of companies that provide a broad range of
engineering, planning, design, consulting, construction and management services for a wide variety
of infrastructure and facility undertakings (Anotonson, 2014). Projects range from highways and
bridges to airports and mines. Construction companies tender for projects from both private and
government entities.
The heavy construction industry, due to the size of typical projects, exhibits several unique
characteristics. It is generally held that one can track the growth of any number of industries based
on global economic growth- which is not always the case for the heavy construction industry.
Governments often spend heavily on infrastructure projects to stimulate economic growth during
recessions (Sharma, 2014). The construction industry environment is complex and fragmented,
presenting construction firms with a number of challenges and unique industry dynamics (Oyewobi,
et al., 2013). Kelly (1984) observes that it is not a single industry but rather a multifaceted band of
industries, comprising banking, materials and equipment manufacturers, contracting organisations
and so forth. This complexity is further augmented by the distinctive nature of each construction
project and the diverse range of stakeholder demands (Oyewobi, et al., 2013).
4 PROBLEM STATEMENT
In light of today’s dynamic and turbulent hyper-competitive business environment, the emphasis of
strategic fit research has shifted from analysing the externally oriented environment-strategy
relationship, to more internally focused relationships between strategy and one or more internal
firm constituents. Indeed, there is considerable evidence in support of this perspective (e.g., Zajac,
et al., 2000; Scholz, 1987; Blarr, 2012). The problem, however, arises when strategic leaders become
too entrenched in aligning strategy with internal contingencies facing the firm, rendering the
organisation inflexible and unable to respond quickly to external changes (Louw & Venter, 2013).
The majority of extant literature on environment-strategy coalignmnet attempts to examine the
performance implications of aligning strategy with the environment, or test the concept of fit in
specific geographic locations (e.g., Lukas, et al., 2001). Although such research did indeed examine
organisations in specific industries, in most cases the industries were only selected as they met
certain predetermined criteria, such as high levels of competition, or were chosen based on the
availability of information.
The method of classifying organisations into strategic groups or profiles based on the content of
their strategies has been widely employed in organisational research. This technique has made
valuable contributions to strategy research as it enables the researcher to define and distinguish a
group of organisations from another collective and then use the classifications to predict the
occurrence of other variables (e.g., performance) (Payne, 2001). This technique is particularly useful
when investigating the strategic fit paradigm between the environment and an organisation’s
strategy. Ideal strategic profile(s) can be derived for a specific industry, based on the industries’
specific key success factors and unique dynamics. This profile(s) would exhibit an ideal environment-
strategy fit and serve as a benchmark for organisations operating in the industry, as any deviations
from this ideal profile will negatively affect performance. In spite of this concepts its intuitive appeal,
one finds relatively little explicit attention to ideal profiles for specific industries in recent strategy
literature. The absence of literature vis-à-vis industry specific ideal profiles can be attributed partly
to a lack of necessary relevant data. Recently, in order to meet the growing information needs of the

users of annual reports, these documents have become rich sources of meaningful, reliable and
relevant information on organisations (Myburgh, 2001). Additionally, sections such as the
Chairman’s and CEO’s statements offer insight from the firm’s perspective on key strategic issues
and future strategic direction that they want to communicate to their stakeholders (Bhana, 2009;
Jansen van Rensburg & Venter, 2012). In light of these recent deveopments, researchers now have
at their disposal the necessary data to further investigate the environment-strategy fit phenomenon
and furthermore, develop theoretically ideal profiles for specific industries.
A caveat. The author makes no attempt to disprove the merit of achieving strategic fit by aligning
strategy with the internal organisation. In the words of miller (1988; 282) “neither strategies nor
structures alone, nor a suitable match between environment and structure, will be adequate enough
to ensure good performance”. In essence, it is balancing the internally and externally oriented
perspectives of fit to achieve a harmony between all three elements- the organisation, its
environment and strategy- that truly represents a strategic fit.
5 RESEARCH PURPOSE
At its core, the purpose of this research is to explore the concept of environment-strategy fit in
industry specific settings. Departing from the perspective of Venkatraman and Prescott (1990:1) who
assert that “coalignment is the degree to which strategic resource deployments adhere to an ‘ideal
profile’ for a given environment”, this research aims to identify ideal strategic groups, based on
Miles and Snow’s (1978) typology in the general mining and heavy construction industries. This will
grant managers and practitioners with valuable insight into achieving sound environment-strategy
coalignmnet in these specific industries.
5.1 PRIMARY RESEARCH OBJECTIVE
The primary research objective is to describe and report on the environment-strategy fit of JSE listed
organisations in the general mining and heavy construction industries.
5.2 SECONDARY RESEARCH OBJECTIVES
The secondary objectives of the study are:
• To identify and describe common strategic stances of organisations in the heavy
construction and general mining industry.
• To identify and describe common strategic actions taken by organisations in the
heavy construction and general mining industry.
• To describe and report on the specific operating contexts of the heavy construction
and general mining industries.
• To classify organisations based on their strategic stances and actions as either
Prospectors, Defenders, Analysers or Reactors.
• To develop an understanding of what strategic profiles exhibit the most appropriate
environment-strategy coalignmnet in the general mining and heavy construction
industries.

Chapter 2: Literature Review
1 INTRODUCTION
The strategy-environment relationship has been a central debate in the strategic and organisation
theory literature. Specifically in the strategic management literature, this debate has emerged to be
principally concerned with not only how the two concepts are interrelated, but also how they,
together, impact firm performance (Payne, 2001). Researchers have proposed that the external
environment should be seen as the initiator of strategy and the organisation achieves a competitive
advantage by developing, or acquiring, the internal resources and dynamic capabilities needed to
implement strategies as dictated by the environment (Louw & Venter, 2013:29). This conceptual fit
between the organisation’s internal and external environments and its strategy can be seen as a key
predictor of how and why certain organisations outperform others (Zajac, et al., 2000). These
alignments of strategy and structure are commonly labelled configurations, which typically classify
organisations according to contextual, structural and/or strategic elements (Payne, 2001).
This classification of organisations assumes that individual members of each group have similar
elements, characteristics or themes. These classifications of organisations are regarded as useful to
strategy research because of their ability to predict the success or failure of organisations, usually
given certain environmental or industry specific conditions (Payne, 2001).
2 STRATEGY AS A CENTRAL COMPONENT IN ORGANISATIONAL
CONFIGURATIONS
One of the primary motives for the use of organisational classification is to define and distinguish a
group of organisations from another collective and then use the classifications to predict the
occurrence of other variables (e.g., performance) (Payne, 2001). This method is particularly useful in
this study as it enables the researcher to classify organisations into strategic groups based on their
strategies employed, and in turn determine the appropriateness of a strategic group to its industry
specific operating environment. An organisation’s strategy has been primarily correlated with the
level of performance, predominantly with environmental fit issues (e.g., Lukas, et al., 2001). While
there are numerous ways to group organisations based on their strategies, not all have proved
equally as valid. Miles and Snow (1978) and Porter (1980) have made seminal contributions to
strategy research with their work in configurations, more specifically strategic groups or generic
strategy types.
One of the most extensively employed typologies was developed by Miles and Snow (1978) to
describe strategic choice. They proposed a framework for analysing internal organisational
relationships between strategy, structure and process as part of the adaptive cycle. In their
framework they identify three main patterns of organisational behaviour that can be classified and
even predicted as ways to adapt to environmental change (Payne, 2001). The three “problems” are
identified as the entrepreneurial problem, the engineering problem and the administrative problem.
The entrepreneurial problem is associated with the organisation’s choice with regard to their
product-market domain, while the engineering problem’s focus lies in the “creation of a system
which operationalizes management’s solution to entrepreneurial problem” (Miles, et al., 1978:549).
The administrative problem involves the integration of the organisation’s internal processes to

support solotions in the other two areas. The value and practical applicability of their typology has
been supported by extensive empirical research. Results from cluster analysis have shown that the
clusters are generally few in number and match the Miles and Snow typology remarkably well (Doty,
et al., 1993; Smith, et al., 1989). The relationship between this typology’s approach and performance
has been empirically analysed with excellent results (Doty, et al., 1993). In addition to the empirical
evidence in support of the Miles and Snow typology, several studies have concluded that the
strategic groups’ (identified by the typology) performance varies with context. For example,
Andrews, Boyne and Walker (2006), in their analysis of 119 English local authorities, used the Miles
and Snow typology as a foundation to show how certain strategic groups outperform others in the
public sector.
Figure 2: Miles and Snow's Adaptive Cycle
Source: Adapted from Miles et al. (1978)
2.1 THE CLASSIFICATION UTILISED IN THIS RESEARCH
The Miles and Snow typology presents a suitable method of classifying an organisation’s corporate
strategy (Jansen van Rensburg & Venter, 2012). However, in order to achieve the objectives set out
for this research, it is necessary to extend the classification model to include the identification of
business level strategies. The approach used by Andrews et al. (2006) provides a useful framework
for understanding and defining both corporate and business level strategy content.
2.1.1 Strategy Content
The concept of strategy content refers to how organisations actually behave, in contrast to
strategies that are simply rhetorical or intended but unrealised (Andrews, et al., 2006:53). It refers to
the actual product of a strategy process (Jansen van Rensburg & Venter, 2012). Andrews et. al.
(2006) conceive strategy content as two interlinking levels. First, strategic stance is the general way
in which an organisation seeks to maintain or improve its performance, akin to an organisation’s
corporate strategy (Ehlers & Lazenby, 2010). This level of strategy is regarded as relatively enduring
and unlikely to change in the short-term. This contention is supported by the concept of
•Selection of the
product-market
domain
Entrepreneuial
•Selection of
technologies for
production and
distribution
Engineering
•Selection of
structures and
processes
Administrative

organisational inertia. Inertia is the strong persistence of existing form and function (Rumelt,
1995:1). In the context of organisational science, the concept infers that changing strategy and the
structural forms and administrative procedures that underpin it is difficult, costly and time
consuming (Rumelt, 1995). The second level of strategy includes the specific decisions an
organisation makes to execute its stance. These strategic actions are more likely to change in the
short term (Andrews, et al., 2006).
2.1.1.1 Strategic Stance
Andrews et. al.’s (2006) classification of strategic stance is based on the Miles and Snow typology.
The typology identifies four ideal types of organisation: the prospector, the analyser, the defender
and the reactor (Miles, et al., 1978:550-558). Each of these ideal types is richly described as a unique
configuration of contextual, structural and strategic factors (Doty, et al., 1993). Miles and Snow
posited that at least three of these ideal types- the prospector, analyser and defender- were
effective forms of organisations. The four types of organisation are discussed below (Andrews, et al.,
2006; Jansen van Rensburg & Venter, 2012; Miles, et al., 1978; Doty, et al., 1993):
 The prospector is the most dynamic of the organisation forms described by Miles and Snow.
They are regarded as highly innovative organisations, and are likely to be pioneers in their
field. This type of organisation strives to enact an environment characterised by rapid and
unpredictable change. Prospectors adapt accordingly to this turbulent environment by using
high levels of environmental scanning to identify and exploit new product and market
opportunities. Due to this rapid rate of product development, prospectors are characterised
by flexible, non-routine technologies. From a structural perspective, they are organic, highly
decentralised and exhibit low levels of formalisation.
 The defender is a less dynamic form of organisation that strives towards strategic stability.
This type of organisation operates in a much more stable and predictable environment.
Consequently, this stable environment permits defenders to devote their efforts away from
environmental scanning to more long-range forecasting and planning. They take a
conservative view of new product development and focus on a narrow range of products or
services, their core activities. This narrow focus enables defenders to compete by
concentrating on efficiency. Defenders produce low-cost goods or services and obtain
efficiency by relying on routine technologies and economies of scale. This type of
organisation is characterised by their mechanistic structures, centralisation, specialisation
and vertical differentiation.
 The analyser can be viewed as a combination of the Prospector and Defender types. They
strive to minimise risk while still exploiting new product and market growth opportunities.
To achieve this, Analysers tend to focus on a core set of products or services, while seeking
to selectively exploit new opportunities. Because of their risk aversion, they are inclined to
pursue new opportunities only after their feasibility has been proven.
 The reactor is typified as an unstable organisational form that lacks a coherent context-
structure-strategy alignment. They are persistently reacting to their environment as they
lack a clear, articulated strategy. Reactors can be regarded as a strategy failure, when one of
the previous three types is indecorously and inconsistently pursued.
2.1.1.2 Strategic Actions
The second dimension of strategy content is described as the specific actions used to support and
operationalise the strategic stance of an organisation (Jansen van Rensburg & Venter, 2012; Louw &
Venter, 2013). Many studies support the notion that changes in strategic actions have a direct effect
on an organisation’s performance (Andrews, et al., 2006). If the strategic actions are to have a

positive effect on organisational performance, ceteris paribus, they should be in harmony with the
overall strategic stance of the firm (Louw & Venter, 2013). The strategic actions can be categorised
as follows (Jansen van Rensburg & Venter, 2012; Louw & Venter, 2013; Ehlers & Lazenby, 2010):
 Market development involves organisations addressing the needs of new markets with its
current products. This can be accomplished by developing new uses for existing products or
by spreading the existing product over new geographic areas. Market development is an
effective strategic decision when the organisation either has access to reliable distribution
channels in the new market or possesses the necessary capital, expertise and resources to
manage the extended operations. Another option is to form strategic alliances with
established organisations in the foreign market they wish to enter.
 Product development is where organisations either modify their existing products or develop
new products to meet the needs of markets they currently serve. Although the costs
associated with research and development are large, organisations are often compelled to
introduce new and improved products when their current offering reaches its maturity
stage. Organisations face the risk of losing their customers to competitors who offer a better
product.
 Diversification entails an organisation expanding into new markets with new products to
secure additional market share aimed at increasing profitability. An organisation considering
to diversify is confronted with two options: related or unrelated diversification. Related
diversification is where an organisation seeks new opportunities in linked industries.
Relatedness may be in terms of the market or industry as well the strategic assets (i.e. those
that cannot be accessed cheaply nor are readily available to non-diversified competitors).
Related diversification is a viable option when an industry is experiencing slow growth and
an organisation intends to increase its sales in a particular market by increasing the number
of products consumed by individual customers. Unrelated diversification as a strategic
decision involves the organisation entering into an entirely new market or industry. An
organisation must possess the necessary skills and resources to compete successfully in the
new territory.
 Vertical integration concerns the acquisition or expansion by an organisation into its
suppliers and/or distributers. When an organisation pursues vertical integration it seeks to
capture more profit from the industry’s value chain. Furthermore, it enables the
organisation to reduce the economic uncertainties and transaction costs associated with its
industry while strengthening the hold of the organisation on the resources it deems crucial
to its competitive advantage. Vertical integration can be achieved in two directions:
backward vertical integration where the organisation expands into the supply of its inputs
and forward vertical integration which entails the expansion into the distribution of its
outputs.
 Consolidation is where an organisation intends to maintain its market share in existing
markets with its existing products. In other words it refocuses on its core business.
Consolidation does not mean that the organisation takes no action at all, instead the
organisation may be externally influenced to reshape or innovate to improve the value of its
products or services. This strategic action may take two forms, namely reshaping through
downsizing or maintaining market share. Reshaping may require the organisation to
unbundle its non-core businesses, implement cost-cutting measures or withdraw from a
market completely. A key determinant of consolidation is the product life cycle. Towards the
end of a product life cycle, an organisation that possesses a high market share is in a better
position to maintain it, owing to the resultant benefits of economies of scale. As a result, it is

crucial for an organisation to gain and maintain market share in the growth phase of the
product life cycle.
 Corporate management modifications by introducing new entrepreneurial blood with fresh
perspectives and specialised skills to facilitate changes in the organisation such as
restructuring.
 Direct responses to macro environmental changes and threats. This may entail new
legislation with which the organisation must comply regarding its impact on the
environment.
 Corporate combination strategies enable different organisations to form partnerships to
share resources, capabilities or distinctive capabilities to thwart increasing competitive
pressure and build a competitive advantage. Cooperative strategic decisions take two forms,
namely joint ventures and strategic alliances. A joint venture is the creation of a new
organisation owned by two or more partners. They are formed to exploit opportunities that
are only viable when the co-owners collaborate. An organisation enters into a strategic
alliance in order to achieve shared goals for a defined period of time. The partner
organisations agree to provide joint services and facilities and to share the costs, risks and
benefits of the business opportunity.
3 STRATEGIC FIT
The alignment or fit of organisational constituents along themes has been a historically central topic
in strategic management theories (Zajac, et al., 2000; Venkatraman, 1989). At the core of this
concept lies the assertion that alignment, or fit of an organisation’s strategy is related to its context-
whether it is the external environment or organisational characteristics, such as structure, culture or
resources. And that this alignment has positive performance implications (Venkatraman & Prescott,
1990). Thus, when analysing the different strategic groups discussed above, the fundamental
preposition is that those strategic groups that closely align strategic and environmental factors will
outperform those that do not.
However, due to the abundance of studies and the decades passed since the first contributions,
different understandings, perspectives and operationalisations of the concept of fit have evolved.
These various perspectives of fit have often resulted in conflicting research findings, stemming from
equivocal definitions of the concept and the corresponding research methods (Venkatraman &
Camillus, 1984). In 1989, Venkatraman developed a classificatory framework of six perspectives of
strategic fit to better structure the field. The six perspectives he identified are: moderation,
mediation, matching, gestalts, profile deviation and covariation (Venkatraman, 1989:424-438). His
core thesis states that when deciding to apply the concept of fit, researchers face two fundamental
questions (Blarr, 2012):
1. First, they must choose the degree of specificity of the theoretical relationship, such as
strategy and environment, as the underlying variables predicted to fit together.
2. Second, the concept must anchor to a particular criterion, for example firm performance or
used in a criterion-free specification.

Figure 3: Venkatraman's Classificatory Framework
Source: Adapted from Venkatraman (1989)
The concept has been used to examine a range of contingencies related to fit (Payne, 2001). These
instances include fit of strategy to resources and capabilities (SubbaNarasimha, 2001), fit of strategy
to structure (Blarr, 2012), fit of organisation to market environment (Dess & Davis, 1984) or fit of
organisation to corporate culture (Scholz, 1987). While researchers and strategic leaders view fit as
crucial to organisational success, which type of fit is often the question. In this research, the fit of
strategy and the industry environment is of primary concern. The profile deviation perspective
identified by Venkatraman (1989) has been employed particularly to test this relationship
(Venkatraman & Prescott, 1990).
Miller (1988) showed that strategies should be matched with complementary environments and
structures to “promote success” (280). In his research he confirmed that strategy has strong
relationships with environment and have a significant influence on organisational structure. Most
importantly, his findings revealed that “neither strategies nor structures alone, nor a suitable match
between environment and structure, will be adequate enough to ensure good performance” (282).
In other words, strategic fit is only achieved when strategies, structures and environments are in
line. Numerous other researchers have also dichotomised fit into external and internal fit. External
fit refers to the congruence between the firm and its environment, with strategy serving as the
mediating link between the two. While internal fit is the coherence between strategy and the
internal components of the organisation, such as structure, managerial systems and organisational
capabilities. Therefore in analysing the nature of fit strategic management literature, two major
classifications of fit are evident.
3.1 INTERNAL FIT
This perspective on the analysis of fit, as the name suggests, takes a more internal orientation in its
classification. This classification draws primarily from the resource-based view literature or on
porter’s value chain (1985). The internal organisation is comprised of its resources, dynamic
capabilities, strategic architecture, goals and values (Louw & Venter, 2013) which are important

determinants of success. These internal components of the organisation must correspond with the
strategy in order for the organisation to succeed. Simply put, the organisation must possess the
necessary amount and type of resources required to implement its strategy (Payne, 2001).
Traditionally this viewpoint regarded an organisation’s sustainable competitive advantage as
determined by the nature and type of its resources- whether they are valuable, rare and costly to
imitate (Louw & Venter, 2013) and how they are utilised (i.e., strategy). Owing to the contemporary
business environment, characterised by dynamism, hyper-competition and turbulence, emphasis has
shifted towards an organisation’s capabilities (SubbaNarasimha, 2001; Louw & Venter, 2013). This
means that an organisation’s distinctive capabilities inherent in its technologies, processes and
strategic architecture form the basis of its competitive advantage. Accordingly, a degree if
consistency must exist between a firm’s strategy and its architecture and the functional processes
and technological capabilities that support it (Miller, 1988; Payne, 2001; Blarr, 2012). However, an
organisation that becomes too entrenched in its resources and capabilities is unable to respond
quickly enough to external developments (Louw & Venter, 2013). In addition, time, competition and
change erode the value of an organisation’s competitive position- defined by its resources and
capabilities. It is the task of management to build on its internal resources by aligning its strategy not
only with its current resources and capabilities, but strategically shaping them to fit in the long-term,
thus creating a sustainable competitive advantage (Payne, 2001).
3.2 ENVIRONMENT FIT
This externally oriented perspective questions the fit between an organisation’s strategy and the
environment in which it operates. Essentially, the contention is that environment and strategy
interact in a dynamic coalignment process (Miller, 1988) and the resulting fit between strategy and
its environmental context has positive performance implications (Venkatraman & Prescott, 1990).
The strategic fit paradigm generally considers the organisational environment as a construct over
which the organisation has limited control. Consequently, the environment is thought to determine
the context of strategy formulation (Lukas, et al., 2001). An organisation’s strategy serves as a link
between the organisation and its environment over which management has direct control. Research
has shown that some strategies are better suited for some environments than others. For example,
in dynamic and uncertain environments, innovation and marketing differentiation typically result in
higher performance (Miller, 1988; Porter, 1980). Researchers have taken the concept of
environment-strategy coalignment one step further by examining the fit of strategic groups within
an environment. In this instance fit is high to the extent that an organisation is similar to an ideal
type of strategic group for its environment. Deviations from the ideal type have negative
performance implications (Doty, et al., 1993). An example of testing fit within this particular class of
fit comes from Venkatraman and Prescott (1990), which empirically examined the performance
implications of environment-strategy coalignment across two time periods, and eight distinct
environments in two different samples drawn from the PIMS data base.

Chapter 3: Research Methodology
1 INTRODUCTION
This chapter explains the rationale for selecting a qualitative approach to achieve the objectives of
the study. The research design followed in this study is a case study of nine South African
organisations in two separate industries. The research was conducted through a content analysis of
the CEO and Chairman statements in the 2012 annual or integrated reports of the organisations
studied to identify common business level and corporate strategies, classify the organisations
strategic stance according to the strategy typology by Miles and Snow and evaluate the strategic fit
of the identified strategies in relation to the industry operating context. The case study research
design, and specific research methods are explained and the logic behind their selection will be
discussed and justified. Furthermore the limitations and ethical considerations will be reviewed.
2 RESEARCH APPROACH
A research approach is a broad strategy of enquiry which encompasses the steps from general
assumptions to detailed methods of data collection, analysis and interpretation (Creswell, 2014:3).
Research approaches are classified under many different terms and categories. The most common
classification, which is used in this study, is into qualitative and quantitative approaches (Tracy,
2013). It is important to note that quantitative and qualitative approaches should not be regarded as
rigid, separate categories or polar opposites. Instead, they represent different ends on a continuum.
A study tends to be more qualitative than qualitative or vice versa (Creswell, 2014:3). The
differences between qualitative and quantitative approaches can be viewed according to the
procedures of enquiry (called research designs, such as quantitative experiments or qualitative case
studies), and the specific research methods of data collection, analysis and interpretation (Creswell,
2014:3). Qualitative research is an approach that has its roots in the social sciences. Recently it has
been employed in a variety of academic disciplines as it allows researchers to answer questions that
quantitative research cannot. The research process typically involves collecting data from the
participants setting, analysing the data according to general themes, and the researcher makes final
interpretations on the meaning of the data. It is an effective way of rendering the complexity of a
situation (Salkind, 2012; Tracy, 2013; Creswell, 2014). Quantitative research, on the other hand, is an
approach used to test objective theories by probing the relationship among variables. The variables
in question are typically measured on instruments in order to collect numbered data which in turn is
analysed using statistical procedures (Creswell, 2014:4).
2.1 RATIONALE FOR A QUALITATIVE APPROACH
Numerous researchers (e.g. Insch, et al., 1997; Nordqvist, et al., 2009; Tucker, et al., 1995) argue
that traditional, quantitative approaches to organisational research have led to studies that maintain
narrow research paradigms on recurring topics. Critics contend that quantitative studies have
hindered organisational research by limiting the kinds of questions that can be answered. Such an
approach is mostly focused on the context of justification rather than discovery (Tucker, et al.,
1995). Qualitative approaches empower organisational researchers to provide well-grounded, rich
descriptions and explanations of the complex processes and phenomena associated with the
dynamics of the organisation (Nordqvist, et al., 2009). Several studies verify this contention. For

example, Jansen Van Rensburg and Venter (2012) followed a qualitative approach to effectively
identify and analyse the strategic stance and actions employed by South African banks in response to
the recent global economic crisis.
The nature of this study calls for an approach that enables the researcher to initially identify and
classify the common strategies employed by specific organisations within the general mining and
heavy construction industries of South Africa. A qualitative approach was best suited to achieving
this objective as it is concerned with the particulars of a case, rather than generalisations and is
regarded as an ideal method for the identification of items in a conceptual domain (Tracy, 2013;
Creswell, 2013). Thereafter, the research aimed to describe the identified strategies and the
operating context of each industry. Qualitative methods are an excellent tool for a researcher intent
on describing individual items, in this case- the common strategies employed by organisations.
Additionally, this approach enabled the researcher to provide a rich, detailed description of the
dynamic industry contexts (Tracy, 2013). Quantitative approaches rarely focus on context (Insch, et
al., 1997). The evaluation of strategic fit, which is a concept inherently based on context, would have
proved problematic if the researcher opted for a quantitative approach. Instead, a qualitative inquiry
allowed the researcher to effectively evaluate and describe the strategic fit of the common
strategies employed relative to the operating context of the industry.
3 RESEARCH DESIGN
A research design is a systematic plan to achieve the research objectives. The design of a study
defines the type of research (e.g. descriptive, correlational, exploratory, or experimental) and the
sub-type (e.g. case study, ethnography, or historical research) employed in the research report
(Tracy, 2013). As was the case when selecting the overall research approach, the primary concern for
the researcher was to choose a research design that would enable him to achieve the research
objectives. Descriptive research, as a research type, is concerned with describing an existing
situation and exploring the causes of particular phenomena absent of any experimental
manipulation (Salkind, 2012). It enables the researcher to provide an accurate and valid
representation of the factors that are relevant to the research question (Tracy, 2013). A descriptive
research design was most suitable for this research report as it allowed the researcher to provide a
detailed description of the strategic actions and industry context of the organisations in question,
and evaluate the strategic actions relative to the industry context to assess their strategic fit.
Creswell (2013:16-17) describes 5 specific research designs, or sub-types, associated with a
qualitative approach:
 Ethnography aims to describe a culture’s characteristics in a natural setting over a prolonged
period of time.
 Grounded theory, where the researcher aims to derive a general, abstract theory of a
process, action, or interaction grounded in the views of participants in a study.
 Case studies describe in-depth the experiences of one person, community or organisation.
 Narrative research is a form of enquiry where the researcher studies the lives of individuals.
 Phenomenological research, in which the researcher identifies the “essence” of human
experiences concerning a phenomenon, as described by participants in a study.
After an extensive review of specific qualitative designs, the researcher believes a case study was the
most appropriate design to use. Case studies aim to explore and investigate contemporary, real-life
phenomenon through detailed contextual analysis of a limited number of events or conditions, and

their relationships (Zainal, 2007:2). A case study approach is especially useful in research where
contextual conditions of the particular phenomenon being studied are integral to its understanding
(Yin, 2009). Merriam (1998) identifies three essential characteristics of a case study design:
particularistic, descriptive and heuristic. Particularistic refers to one event, process or situation that
is the focus of a study. Descriptive refers to the rich and extensive set of details relating to the
phenomena. This characteristic illuminates the complexities of a situation, particularly when there
are many factors contributing to the understanding of a phenomenon. Lastly, heuristic indicates that
a case can explain the reasons for a problem or issue, i.e. what happened and why. Case studies do
not claim to be representative. The value lies in what can be learned from a single case (Salkind,
2012). Such a research design does not seek to prove new theory or concepts, but rather improve
our understanding of existing knowledge (Yin, 2009). Indeed, the purpose of this research was to
explore the concept of environment-strategy fit in industry specific settings. A case study of
organisations in two specific industries was a useful method to achieve this. A multiple case study
design uses more than one case to gather data and draw conclusions. By using multiple cases in this
research, the researcher was able to corroborate the data from two groups of four organisations in
the general mining and heavy construction industries, therefore enhancing the validity of the study
(Merriam, 1998; Creswell, 2014). In a descriptive and interpretive case study, the researcher
analyses, interprets and theorises about the phenomenon against a theoretical framework (Zainal,
2007).
Case studies are a prominent design used in the fields of medicine, psychology and education.
However, case studies are not limited to people. The Harvard Business School frequently includes
case studies of successful and failed businesses in its course work to help students understand the
mechanics of how a business might be affected by a variety of factors (Salkind, 2012). Locally, Mason
(2007) conducted a case study on four South African organisations to understand how more
successful companies, operating in environments of differing complexity and turbulence, differ in
their use of management and strategic activities from companies that are less successful.
4 SAMPLING
The next section of this chapter will explain what sampling procedures, describe the context and
participants.
4.1 SAMPLING STRATEGY
Sampling is the selection of cases from the wider population. Sampling is the link between the study
population and its generalisation to the wider population. A key consideration when sampling is if
the sample is representative of the population i.e. do the characteristics of the sample approximate
to the characteristics of the population. The nature of the research dictates whether the sample
should be generalizable to a wide population or representative with respect to characteristics that
are important to the study question (Bloor & Wood, 2006:154). Sampling methods fall into two
broad categories: probability and non-probability sampling. Probability sampling methods are
typically more representative of the total population because selection bias is avoided and the
selection of participants is determined by chance. Probability sampling techniques are generally
associated with quantitative approaches as they are generalisable. Non-probability sampling on the
other hand, refers to the selection of participants according to certain reasons other than
mathematical probability (Salkind, 2012). Non-probability sampling includes a range of approaches
such as convenience, where participants are selected on the basis of their availability, or snowball,

where the researcher asks each respondent to suggest other potential respondents (Bloor & Wood,
2006). Another non-probability sampling method, purposive sampling involves deliberately selecting
participants based on criteria that have relevance to the research question (Bradley, 1993).
Purposive sampling was the sampling strategy used in this research. It allowed the researcher to
select participants based on certain characteristics pertinent to the research objectives.
4.1.1 Selecting the participants
The next step in the sampling process involved defining the selection criteria and choosing
appropriate participants for the case study. Cohen and Crabtree (2006) note that to increase the
validity of the research when using purposeful sampling, it is imperative to select cases that will yield
the most appropriate and richest information relevant to the research. The nature of this research
called for participants operating in the general mining and heavy construction industries, listed on
the JSE. Selecting organisations based on the industry in which they operate served as the primary
criterion, as the nature of this research aimed develop environment-strategy alignment theory in
specific industries. An additional criterion was a listing on the JSE. The rationale behind this decision
was based on the listing requirements for the JSE. South Africa is the first country in the world in
which the stock exchange has made integrated reporting a mandatory requirement for all listed
companies (Louw & Venter, 2013). The International Integrated Reporting Council provides an
outline of the content of an integrated report (International Integrated Reporting Committee, 2011):
• Organisational overview and business model: What does the organisation do and how
does it create and sustain value in the short, medium and long term?
• Operating context, including risks and opportunities: What are the circumstances under
which the organisation operates, including the key resources and relationships on which
it depends and the key risks and opportunities that it faces?
• Strategic objectives and strategies to achieve those objectives: Where does the
organisation want to go and how is it going to get there?
Participants were drawn from two different industries namely, the general mining and heavy
construction industries. The rationale behind this decision was to widen the scope of understanding
in this research by extending the theory across two contexts (Cohen & Crabtree, 2006).
When selecting the number of participants for a multiple-case study there is no single rule
concerning the minimum number of cases that should be selected, unlike statistical sampling
methods (Cohen & Crabtree, 2006). Instead, the researcher should limit the number of cases to the
point where the incremental contribution of extra cases is only marginal (Cohen & Crabtree,
2006:140). The researcher selected four organisations from both the general mining and heavy
construction industries. The researcher selected typical cases organisations as they provided a cross
section of the larger group of firms operating within the industry (Cohen & Crabtree, 2006). The
specific organisations chosen in the heavy construction industry were: Murray and Roberts Holdings,
Ltd; Basil Read Holdings Ltd.; Group Five Ltd.; Aveng Group Ltd. In the general mining industry the
following organisations were selected: Chrometco Ltd.; BHP Billiton plc; African Rainbow Mining Ltd.;
Anglo American plc. Table 1 provides a brief description of each organisation:

Table 1
Organisation name Abbreviation Description
Heavy construction
Murray & Roberts Holdings, Ltd. MUR Murray & Roberts is an engineering, contracting and construction services company, with
a primary focus on the resource-driven construction markets in industry, mining, oil, gas
and power.
Basil Read Holdings, Ltd. BSR Basil Read Holdings is one of the top construction companies in South Africa founded in
1952. Its subsidiary companies are active in a range of construction related areas business
throughout Africa.
Group Five, Ltd. GRF Group Five is an integrated construction services, materials and infrastructure investment
group.
Aveng Group, Ltd. AEG The Aveng Group is one of the largest infrastructure development companies in Africa
with a reputable track record and worldwide presence.
General mining
Chrometco, Ltd. CMO Chrometco is primarily involved in the exploration of mineral resource projects and the
possible beneficiation thereof.
BHP Billiton Plc. BIL BHP Billiton is a leading global resources company and is among the world’s top producers
of major commodities including iron ore, copper and aluminum. In the 2013 financial year,
the BHP Billiton workforce comprised of approximately 128 800 employees working in 26
countries around the world.
African Rainbow Minerals, Ltd. ARI African Rainbow Minerals is a leading South African diversified mining and minerals
company characterised by its low unit cost operations, growth opportunities and long-life.

Anglo American Plc. AGL Anglo American is one of the world’s largest mining companies, headquartered in London.
Its portfolio of mining businesses includes precious metals, minerals, base metals and bulk
commodities.
Source: www.sharenet.co.za

5 DATA COLLECTION AND ANALYSIS
5.1 DATA SOURCES
The data sources selected for this research were considered the most appropriate sources of relevant
information that would enable the researcher to effectively achieve the set objectives. The primary
sources of this were the nine South African organisations from two industry groups detailed above in
sampling. The data collection techniques used in this research were the literature review used to
construct a theoretical framework and documentation analysis.
5.1.1 Documentation in organisational research
Document analysis refers to the study of public and private documents such newspapers, personal
journals, minutes of meetings and annual reports (Tharenou, et al., 2007:124). Documentation as a data
collection technique is advantageous as it does not actively interfere with the participants, such as
interviews or administering questionnaires, making it unobtrusive and non-reactive (Tharenou, et al.,
2007). Obtaining access to relevant documents is often problematic as they may be protected or
unavailable to the general public (Bloor & Wood, 2006). According to section 8.63 of the listing
requirements, organisations are required to produce an annual report (Practice notes, 2013). In light of
this, the annual reports of the participants served as a valuable source of secondary data that was
publically available and easy to access. Annual reports provide an abundance of qualitative and
quantitative data and as a result have been used extensively in organisational research (McPhee, 2002).
The data contained within these reports is important and thoughtful, as the organisation has allocated
resources and the informants have given time for their compilation (Creswell, 2013; Tharenou, et al.,
2007). Readers of annual reports typically review the financial and nonfinancial information contained in
the report to form an opinion about the organisation (Zeller, et al., 2012). It is for that reason that
compilers of annual reports can potentially use voluntary disclosures in such a way as to shape the
readers’ opinion; portraying the organisation in a positive light, or masking negative information
(Yuthas, et al., 2002). However, annual reports are key form of formal communication of an organisation
to its shareholders (Jansen Van Rensburg & Venter, 2012:9638). As outlined above, the JSE listing
requirements vis-à-vis integrated reporting provide valuable insight from the firm’s perspective on key
strategic issues and future strategic direction that they want to communicate to their stakeholders.
Two sections within these documents, namely the CEO and chairman’s statements, were considered by
the researcher to offer the most appropriate data relevant to the study. Both the CEO and Chairman are
actively involved in the strategy formulation process (Ehlers & Lazenby, 2010). Hence their statements
present an accurate reflection of the main strategic issues facing the organisations, and the strategic
actions and decisions in response to their environment (Jansen Van Rensburg & Venter, 2012:9638). This
is corroborated by a recent PricewaterhouseCoopers (2013:15) study which revealed “61% of companies
linked strategic choices to external drivers” in their annual reports.
5.2 DATA ANALYSIS
The research was conducted through content analysis of the Chairman and CEO statements in the
annual reports. Where verbatim quotes are used the abbreviation was used in conjunction with the year

and page number to indicate the source of the quotation (ARI, 2012:13; African Rainbow Minerals
Annual Report, 2012:13). Content analysis is a group of procedures for studying the contents and
themes of written text. This method of analysis provided the researcher with rich, detailed data in
addition to being an unobtrusive source of data (Insch, et al., 1997:1). Insch, Moore and Murphy
(1997:6-15) proposed an eleven step procedure for using content analysis which was adapted to this
research report. Each step will be explained followed by a description of how it was employed in this
research.
Step 1: identify the questions to be investigated and the constructs involved. This step concerns a review
of the literature for relevant theory that serves as the basis for the definition of research questions and
theory. The researcher used theoretical rationales from the literature to identify what words and
phrases would represent a viable measure of the construct. An objective of this research was to identify
and classify corporate and business level strategies. The researcher conceptualised these two constructs
in order to facilitate the aforementioned process. Step 2: identify the texts to be analysed. The identified
texts, i.e. the CEO and Chairman Statements, were selected as they served as an appropriate source of
information to capture the constructs and answer the research questions. Step 3: specify the unit of
analysis. The unit of analysis is the basic unit of text to be analysed. Common units of analysis include a
single word, word sense or phrase, sentence, paragraph or the whole document. The reliability of
content classification is dependent on the unit of classification and it was for that reason the researcher
chose to classify specific words and phrases. If the researcher used too large of a unit, for example a
sentence or paragraph, he may have potentially missed a phenomenon of interest. On the other hand,
too small of a unit could have potentially disguised interpretations in context (Insch, et al., 1997:10).
Step 3: specify the categories. This step entails the classification of the unit of analysis into categories.
The categories are based on the research question and underlying theory and constructs. The strategy
typology by Miles and Snow, adapted by (Andrews, et al., 2006) aided in the analysis of strategic stance.
Organisations were classified as employing a stance of a Defender, Prospector, Analyser or Reactor. This
classification was based on the corporate strategy followed or their strategic intent. Business level
strategies were identified based on the strategic actions of the organisations. The researcher used an
existing content analysis template developed by Gao, Darroch, Mather and MacGregor (2008:10) to
specify the exact categories for analysis, see table 2. Step 4: collect data. This step involved the
researcher hand-coding the texts identified in step 2 into the categories identified in table 2. Care was
taken to ensure consistent, accurate classification of words and phrases into categories. Step 5: assess
reliability. The results of the classification were checked to ensure the coding rules were applied
correctly. Stability reliability was assessed by repeating the coding after one week to ensure the same
results. Step 6: analyse data. The data gathered facilitated the classification of the organisations
strategic stance (corporate strategies) and their entrepreneurial solution (business level strategies).
Common strategies employed by organisations operating within the same industry were then identified.
The strategic fit of these common business and corporate strategies was assessed by evaluating their
appropriateness in relation to their specific industry or operating context.

Table 1: Definition of the Variables Used in the Content Analysis
Index 1: Strategic Objective
(1) Pursue the development of a diverse portfolio of innovative products or services (P).
(2) Pursue the development of innovative products or services based on high quality, cost-effectiveness, and
efficient operation (A).
(3) Pursue high quality, cost-effective products or services through efficient operations (D).
Entrepreneurial (product/market) Dimension
Index 2: Product Innovation
(1) Always initiate, create new ideas, new products, or new services (P).
(2) Focus on products currently developed and selectively follow pioneers, once the promise of their innovative
products or services is demonstrated. Alternatively, pursue product innovation based on proven evidence from the
existing product/market space of pioneers (A).
(3) Few new products or services are currently developed or are likely to be developed in the near future. Any new
products under consideration are likely to be closely related or complementary to existing products or services (D).
Index 3: Product/Market Breadth
(1) Continually changing and broader in nature throughout the organization and marketplace (P).
(2) Fairly focused in certain markets, while pursuing innovative opportunities in other markets (A).
(3) Well focused, relatively stable, and consistently defined (D).
Index 4: Risk Taking
(1) Aggressive. Recognizes risks and threats from new product and market development, but still willing to pursue
(P).
(2) Moderate. Maintains stability in current business while also moving into new markets but with careful risk
analysis, based on proven evidence (A).
(3) Conservative. Little attempt to try risky projects or new areas (D).
Index 5: Success Posture
(1) A reputation as a first mover, innovator, and change creator (P).
(2) Achieves high quality, cost-effectiveness, and operational efficiency in current products/markets but also
pursues an image of innovator in newly developing products/markets (A).
(3) Has an image of offering products or services that are in high quality, cost-effectiveness, or operational
efficiency (D).
Note: D= defender; A= analyser; P= prospector
Source: Gao, H., Darroch, J., Mather, D. & MacGregor, A., 2008

6 ETHICAL CONSIDERATIONS
Ethical clearance has been applied for by UNISA on behalf of the researcher. The researcher did not
make any attempts to contact the organisations or employees of the organisations studied in the
research. The data used in this research is publically available and accessed on the internet.
7 LIMITATIONS
Purposive sampling is a very subjective sampling strategy. As a result the researcher may have selected
cases that are not typical of organisations within the industry, and as a result do not provide an accurate
cross section. Although multiple cases were selected to improve the generalizability of the research,
case study research is by definition unrepresentative of a wider population. A potential are of concern
when using content analysis is the potential researcher bias when extracting the data from contextually
rich communications (Insch, et al., 1997). The researcher acknowledges he may have incorrectly
interpreted the true meaning and intent of words and phrases coded from the text. In addition, the
compilers of the annual reports may have excluded certain communications to avoid drawing attention
to weaknesses or disclosing a future action to competitors.

Chapter 4: Research Findings
1 INTRODUCTION
In the preceding chapters the researcher has explained the rationale for his research, presented a
literature review and theoretical framework of organisational strategy, classification of organisations
according to their strategic intent and actions, the concept of a strategic fit and has explained the design
of this research. In this chapter, it is the aim to explore the findings of this research. The results of the
content analysis are presented as a description of each of the general mining and heavy construction
organisations’ strategic stances based on the overall corporate strategy followed and the specific actions
employed to support the stance. Thereafter, the operating environment of each industry is described
and used to determine the degree of alignment between the operating context and the common
strategic stances and actions of the organisations in each industry i.e. the strategic fit.
2 THE COMMON STRATEGIC STANCES AND ACTIONS OF JSE LISTED HEAVY
CONSTRUCTION AND GENERAL MINING ORGANISATIONS IN 2012
In this area, table 3 presents a summary of the content analysis, followed by a discussion of the strategic
groups in each industry. In table 3, evidence in support of the strategic stance is presented, followed by
a defining quote and key terms the organisation uses to describe the essence of its strategy. The
interpretation of strategic stance is thus subjective and founded on the organisation’s own
communication of their strategies and strategic actions. The data sources analysed in this research focus
largely on key facets of the entrepreneurial and engineering solution (Figure 2). These aspects were
used to develop a perspective on the stance of each organisation.
2.1 THE GENERAL MINING INDUSTRY
The analysis of the strategic stance of the organisations investigated revealed that the strategic
positioning of firms in the general mining industry is dominated by the Analyser strategic stance, as all
four organisations were classified as Analysers. These organisations strive to minimise risk while
simultaneously seeking to exploit new product and market growth opportunities. To achieve this, they
tend to focus on a core set of products or services, while seeking to selectively exploit new
opportunities. None of the four organisations are focused on a single stage of the mining value chain
(Figure 1). Chrometco, the smallest of the four organisations (determined by market capitalisation on
the date of the annual report publication) is involved in mining and exploration, while the remaining
three larger firms are engaged in activities throughout the value chain, including exploration,
acquisition, mining, beneficiating and marketing. This vertical integration along the industry value chain
is a common corporate strategy followed by the organisations.

Table 2: The Strategic Stance and Strategic Actions of the General Mining and Heavy Construction Organisations
Strategic Stance Strategic Actions
GENERAL MINING
CMO: Overall strategic stance can be described as focused on the exploration and mining of chrome, while carefully seeking to diversify
into platinum group metals and other bulk commodities. This is a typical ANALYSER stance.
Chrometco is a young company involved in the exploration and
mining of chrome, the organisation is carefully repositioning itself to
move into platinum group metals (PGMs) and other bulk
commodities. Strategic stance is described in the following terms:
Defining quote:
“Chrometco’s exposure to a single commodity is therefore of concern
to the board, which believes it is in the interests of the company to
diversify its mineral portfolio. Fortunately the healthy balance sheet
and lack of debt places the company in a sound position to ride out
the current downturn in the metal markets, while at the same time
seeking new opportunities at reasonable prices” (CMO, 2012:6)
 A currently limited product and market scope (focus on
exploration, chrome)
 Primary objective is to acquire interests in mineral rights
 Seeking to diversify into related sectors
 Vertical integration through the reacquisition of the
Rooderand chrome deposit
 Consolidating: limited volume mining production at
Rooderand in response to sharp decline in price of chrome
AMS: Overall strategic stance can be described as a focus on core operations while cautiously investing in low risk opportunities. This is a
typical ANALYSER stance.
Anglo American has a uniquely diversified portfolio of mining
businesses that spans bulk commodities, base metals and precious
metals and minerals.
Defining quote:
“We have a substantial potential pipeline of high-quality growth
options in the most attractive commodities. However, given the
increased challenges involved in developing large and complex
greenfield sites, the Board will apply a highly disciplined approach to
the allocation of capital, with smaller, lower-risk brownfield expansion
projects more likely to find favour” (AMS, 2012:2).
 Unique diversification of businesses exposes it to all stages
of the economic cycle
 Objective is to become the world’s leading mining company
 Organic growth through investment into new mines and
expansion of existing operations

 Growth through acquisitions and cautious investment in low-
risk, brownfield expansion projects
 Consolidation through increased operating efficiency and
restructuring and cost cutting of platinum business
 Divestment of non-core businesses
BIL: Overall strategic stance can be described as seeking to create a highly diverse portfolio while maintaining focus on its core operations.
This is a typical ANALYSER stance.
BHP Billiton creates shareholder value through the discovery,
acquisition, development and marketing of natural resources.
Defining quote:
“The diversification of the BHP Billiton portfolio continues to be our
defining attribute. The quality of our people, our asset base and our
unchanged strategy of owning and operating large, long-life, low-
cost, expandable, upstream assets diversified by commodity,
geography and market, together with our ability and commitment to
investing through the cycle and delivering projects on budget and to
schedule, is what sets us apart from our peers” (BIL, 2012:5).
 Focused on owning and operating large, long-life,
expandable, upstream assets
 Defined by highly diverse portfolio
 Organic growth through continued investment in low-risk,
brownfield projects
 Horizontal integration through acquisition (for example: HWE
Mining and Petrohawk)
 Consolidation: simplify the portfolio by the sale of non-core
assets (for example: Richards Bay Minerals and Yeelirrie
uranium deposit) and implementation of cost cutting
measures to reduce operational costs and non-essential
expenditure
ARI: Strategic stance can be described as a focus on high operational efficiency while cautiously seeking to diversify through joint ventures,
acquisition and exploration in Africa. This is a typical ANALYSER stance.
ARI is a diversified mining and mineral company involved in
mining and the beneficiation thereof.
Defining quote:
“We remain focused on improving efficiencies at our existing
operations, while at the same time continuing to grow our quality
asset base” (ARI, 2012:10).

 Focus on operational efficiencies
 Continues to assess acquisition and joint venture
opportunities
 Organic growth through increased volumes and new growth
projects
 Revenue growth by increasing sales volumes across its
portfolio to mitigate the effect of lower commodity prices
 Concentrated growth through capital expenditure projects
resulting in higher production and sales volumes, improved
efficiencies and extended lives of mines
 Implemented a range of cost cutting initiatives
 Related diversification and market development through
acquisitions, joint ventures and strategic alliances
HEAVY CONSTRUCTION
BSR: Overall strategic stance can be described as a focus on its core sectors, while simultaneously exploring growth opportunities in
emerging markets. This is a typical ANALYSER stance.
Basil Read’s core focus lies in engineering, procurement and
construction, with additional involvement in open cast mining.
Defining quote:
“As part of this strategic review, we have renewed our focus on our
core business of EPC (engineering, procurement, construction) while
consolidating recent acquisitions that have diversified our earnings
base (BSR, 2012:14).
 Strong organic and acquisitive growth in recent years has
made Basil Read a strong competitor in its core sectors
 Diverse group of companies allow it to offer a comprehensive
service, while securing additional work for the group
 Based in South Africa with operations in Africa and other
emerging markets
 Consolidation of its activities to focus on its core skills
through divesture of non-core assets and businesses (for
example: sold major portion of the TWP group, and the
disposal of its 50% stake in Siyaya Energy)
 Market development by tendering for projects in Africa and
abroad (for example: BSR was awarded a road project in
Mozambique and the construction of an international airport
in St. Helena), investigation of possible strategic alliances to
increase its footprint in Africa, and an intention to balance its
dependence on public by tendering for more private projects
 Product development through the establishment of a
 bitumen reactor plant to supply its own operations and the
construction sector as a whole (related diversification is in
line with its strategy)

 Reduction of operating costs through optimising internal
efficiency
AEG: Overall strategic stance can be described as a core focus in construction, infrastructure and engineering activities, while pursuing
growth opportunities in related sectors. This is a typical ANALYSER stance.
The Aveng Group is a leading infrastructure development
company providing a diverse range of construction,
infrastructure and engineering products, services and solutions.
Defining quote:
“The Aveng strategy aims to optimise and enhance the performance
of the group’s existing portfolio to generate greater shareholder
value, and to expand in the short to medium term in selected
geographies (rest of Africa, Middle East, South East Asia) and markets
(power, water, rail, steel) that offer the greatest potential for
sustainable growth” (AEG, 2012:28).
 Broad exposure across the infrastructure value chain gives it a
multidisciplinary capacity
 Reinforce its position in selected areas of the infrastructure
market in South Africa and the rest of Africa
 Organic growth through market development and
diversification of product areas
 Consolidation: enhancing the profitability of existing portfolio
through operational efficiency and improved project
execution
 Market development (for example: entering four new
markets)
 Related diversification (for example: into rail and energy)
 Recovery of a number of businesses through restructuring
(for example: the construction and engineering businesses in
South Africa)
GRF: Overall strategic stance can be described as focused on its core activities with a capability to capture growth from turnkey offerings
and the full value chain in the building and infrastructure markets. This is a typical ANALYSER stance.
Group Five is an integrated construction services, materials and
infrastructure concessions group.
Defining quote:
“looking forward, Group Five will continue to develop the skills
required for future growth while focusing on retaining existing
capacity- which, in turn, requires the achievement of a delicate
balance between investment in required resources against desired
returns in fluid markets” (GRF, 2012:30).
 Focused on quality management in every aspect of its
operations
 Cost cutting through retrenchment of employees and cost
reduction initiatives

 Capacity to capture multiple margin streams across the
building and infrastructure value chain and offer a full
turnkey solution
 Global operations with focus on Africa
 Restructuring to improve group’s efficiencies
 Market diversification into the rest of Africa
 Divesture of loss-making construction materials businesses
and cancellation of a number of loss-making contracts in the
Middle East
MUR: Overall strategic stance can be described as diversified engineering and construction group with a strong focus on a segment of the
market while selectively seeking to exploit opportunities in related sectors. This is a typical ANALYSER stance.
Murray & Roberts is a diversified engineering and construction group
with a primary focus in resource driven construction markets.
Defining quote:
“The Group’s focus on growth aims to enhance shareholder value
through a return to profitability as soon as practically possible. It
envisages aligning the Group’s portfolio of businesses selectively with
market segments and geographies that present sustainable growth
potential and simultaneously expanding its offshore revenue base”
(MUR, 2012:26).
 Objective is to be leading diversified engineering and
construction group in chosen sectors
 Focus on expansion into Africa
 Restructure through reorganisation of businesses and
introduction of new management and key executive
appointments
 Consolidation through business closures, sale of discontinued
operations, cost cutting, efficiency initiatives, and
realignment of group
 Organic growth through market development and
acquisitions

1. Chrometco listed on the JSE in 2005 as a mineral exploration company. Since its listing, it has
expanded its operations into mining and the possible beneficiation thereof. In 2011, the
organisation re-acquired the Roodarant chrome deposit and subsequently began mining
operations at the site. Chrometco’s vertical integration objectives are emphasised by the
following quote: “In addition your board continues to seek suitable additions to Chrometco’s
mineral portfolio” (CMO, 2012:5)
2. African rainbow Mineral’s core focus lies in the mining and beneficiation of certain minerals. In
the FY2012, the organisation set up a new division, ARM Exploration, which “focuses on
identifying, exploring for, evaluating and acquiring mineral resource projects that have the
ability to outline and define sustainable mineral resource for mine development” (ARM,
2012:95).
3. BHP Billiton is the largest firm in this research, with a market capitalisation of US$160.6 billion
and is fully integrated along the industry value chain. The organisation’s “strategy is to own and
operate large, long-life, low-cost, expandable, upstream assets” (BIL, 2012:2).
4. Anglo American is another organisation with operations spanning across the entire mining value
chain. “As our business model illustrates, mining is only part of the story”. The organisation
boasts sector-leading exploration teams and “Many of the commodities we mine are processed
and refined further before we apply our market knowledge to deliver a quality product our
customers value” (AMS, 2012:8).
In line with Miles and Snow’s (1978) description of an Analyser, the four organisation’s approach to
growth along the value chain can be characterised as cautions, only capitalising on opportunities once
their feasibility was proven.
Out of the four organisations, Chrometco is the only one to focus on a single product, chrome. Although
this narrow product focus could be characterised as a Defender stance, the data analysed signalled a
clear strategic intent to diversify its mineral portfolio as “Chrometco’s exposure to a single commodity is
therefore of concern to the board” (CMO, 2012:5). The remainder of the organisations possess a diverse
portfolio of minerals. According to BHP Billiton CEO Marius Kloppers, “The diversification of the BHP
Billiton portfolio continues to be our defining attribute” (BIL, 2012:5). The organisation’s product offering
spans the petroleum, aluminium, base metals, diamonds, stainless steel materials, iron ore, manganese,
metallurgical and energy coal sectors. African Rainbow Mineral’s investment in gold through its
shareholding in Harmony, the third largest gold producer in South Africa (Mbendi, 2002), substantiates
its diversification aims. Anglo American is no different as its portfolio of mining businesses spans bulk
commodities, base metals and precious metals and minerals.
In terms of product/market breadth, both Anglo American and BHP Billiton have a global presence. BHP
Billiton, for example, operates in 25 countries worldwide (BIL, 2012). The bulk of African Rainbow
Mineral’s operations are located in South Africa, with several additional ventures in Zambia and the
Democratic Republic of Congo and exploration activities in Mozambique. Through its exploration
division, ARM intends to expand its operations into sub-Saharan Africa.
Another common strategic element identified in the analysis was a strong emphasis placed on the
continuous improvement of operational efficiency. Chrometco was the only organisation that neglected
to communicate a strategic intention to do so. This could partially be attributed to the relatively limited

scope of strategy related content found in their 2012 annual report. The other three organisations,
however, have incorporated it into the organisation’s overall strategy. Figure 4 depicts graphically
illustrates ARM’s strategy, which earmarks operational efficiency as critical to their success.
Figure 4: ARM Strategy
Source: African Rainbow Minerals (2012)
For Anglo American, operational efficiency is regarded as one of four strategic elements that will enable
it to achieve its strategic aim of becoming the leading global mining company. The organisation
describes it as “Organising efficiently and effectively to outperform our competition throughout our
value chain” (AMS, 2012:8).
2.2 THE HEAVY CONSTRUCTION INDUSTRY
As is the case with the general mining industry, the analysis of the data revealed that all four
organisations operating in the heavy construction industry could be classified as Analysers in terms of
the Miles and Snow typology (Andrews, et al., 2006). The four organisation’s strategies included a focus
on their core sector of construction, while simultaneously pursuing opportunities in related sectors, such
as the manufacture of steel products used in construction. This “duality” is the core feature of the
Analyser strategic stance. It combines the strengths of both the Defender (i.e., “maintaining a firm core
of traditional products and customers”) and Prospector (i.e., “locate new product and market
opportunities”) into a single system (Miles, et al., 1978:555).
A focus on construction was a common element in the four organisation’s strategies. The majority of
each organisation’s revenue was earned through their construction division.

1. Basil Read’s construction division contributed 58% to the group’s revenue in the FY2012. The
core focus of this division lies in civil engineering, roads and building operations.
2. 65% of the Aveng Group’s revenue in the FY2012 was earned through its construction division.
The group’s construction division is comprised of two operating groups namely, Aveng Grinaker-
Lta and McConnell Dowell Corporation Limited. Aveng Grinaker-Lta is a multidisciplinary
construction and engineering group based in South Africa, with a focus in the power, mining,
infrastructure, commercial and industrial, oil and gas sectors. The McConnell Dowell
Corporation, anchored in Australia, is a major engineering, construction, building and
maintenance contractor servicing the building, infrastructure and resources markets with
expertise in building, rail, civil, electrical, marine, mechanical pipelines, fabrication, tunneling
and underground services.
3. The Murray & Roberts construction division contributed a total of 76% to the group’s revenue in
the FY2012. The construction division is comprised of three platforms, each incorporating a
number of businesses. The first platform, construction Africa and Middle East, earned 22% of
group turnover in the FY2012 and is involved in project development and design, planning and
engineering, construction works, maintenance and refurbishment and operations and facility
management in the metals and minerals, industrial, infrastructure and building sectors. The
construction global underground mining platform contributed 28% to group turnover in the
FY2012 and is involved in planning and engineering, construction works, operations and facility
management in the metals and minerals sector. The final platform, construction Australasia oil
and gas and minerals contributed the remaining 24% of revenue and its operations involve
planning and engineering, construction works and maintenance and refurbishment in the metals
and minerals and industrial sectors.
4. Group Five’s construction cluster comprised the business segments of building and housing, civil
engineering and engineering. Engineering incorporates the businesses of projects and
engineering and construction. This division contributed 81% of group revenue in the year under
review. The group’s building and housing businesses are involved in the design to build and
construction of large buildings and human settlements in the real estate and related
infrastructure sectors. The civil engineering businesses operate in the construction of large
structures in public and private infrastructure, including heavy civil structures, roads, ports,
airports and pipelines. The projects businesses are active in multi-disciplinary plant construction
covering structural, mechanical, electrical and piping in the mining, industrial and power sectors.
The group’s engineering and construction services deliver multi-disciplinary projects from
feasibility through to supporting bankability and front-end design, as well as project
management of contracts during execution to completion in the industrial, power oil and gas
and water sectors.
The organisations have been able to maintain their firm core of traditional products and customers
(Miles, et al., 1978) by integrating along the entire value chain and diversifying the range of services they
offer and establishing a presence in a number of sectors. This gives the organisations the capacity to
offer complete, multi-disciplinary solutions to clients and capture revenue across the value chain. In
addition, the data analysed indicated a clear strategic intent by the organisations to continually improve
their operational efficiency.

Miles and Snow (1978) suggest that Analysers can grow through product and market development. It is
evident- when examining the broad scope of businesses the four organisations in this study are
comprised of- that they have indeed followed these strategies. Figures 5- 8 depict the individual
structures of the organisations to illustrate the products and markets the organisations have expanded
into:
Figure 5: The Basil Read Group Structure
Source: BSR (2012)
Figure 6: The Aveng Group Structure
The Basil Read
Group
Construction Mining Engineering Developments
The Aveng
Group
Construction
and engineering
South Africa
and Africa
Australasia and
Pacific
Manufacturing
and processing
Open cut
mining

Source: AEG (2012)
Figure 7: Murray & Roberts Group Structure
Source: MUR (2012)
Figure 8: Group Five Structure
Source: GRF (2012)
Murray & Roberts
Construction Africa
and Middle East
Construction global
underground mining
Engineering Africa
Construction
products Africa
Group Five
Investments and
concessions
Manufacturing Construction
Engineering and
construction
services

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